Spotify's paid base in Q3 grew 2% to 306 million, and total monthly active users increased 1% to 788 million versus the prior quarter. "We think Spotify is unusually well-positioned for the age of agentic AI," co-chief executive officer Gustav Söderström said on Thursday's earnings call.
The company wired OpenAI's ChatGPT and Meta Platforms' Muse into its service so people can launch Spotify directly inside those tools. Some investors wondered if that risks turning Spotify into plumbing, but Söderström said listeners still engage directly with the service. As trading began in New York, shares climbed as much as 12% to $588.88.
For the September quarter, revenue came in at €4.97 billion, or $5.58 billion, up 16% from a year earlier and just under the €4.98 billion Wall Street expected. Gross margin landed at 33%, matching analyst projections.
Ads remain the soft spot. Advertising revenue reached €482 million, short of the €484.8 million forecast. The ad business has long been tougher to scale than subscriptions, and Spotify has been reworking its ad tech to bring more marketers onto the platform. "We're moving in the right direction, and there's more progress ahead," co-CEO Alex Norström said.
Spotify renewed its deal with Joe Rogan, which effectively gives the company the ability to sell ads on his show. Norström called it the most popular podcast in the world. Spotify also collaborates with Amy Poehler on her show and has an agreement with Netflix Inc. to carry select podcasts on the streamer.
The company said it plans to broaden its audiobook push. Audiobooks, which Spotify says drive revenue - especially from heavy listeners who pay for additional hours - are scheduled to roll out to additional countries such as Spain, Mexico and Norway. In Sweden, its home market, Söderström said that listening to audiobooks on the platform now nearly rivals music in scale, and he added that 50% of the population pays for Spotify.
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On the product front, Spotify is continuing to sign music deals with labels and publishers to build a forthcoming AI remix feature that would let users pay more to tailor tracks. It also faces rising competition from startups pursuing similar tools.
Spotify guided to €5.2 billion ($5.84 billion) in fourth quarter revenue and 818 million monthly users, which it said were largely in line with analyst views. "Subscriber additions are healthy, premium trends stayed resilient and 4Q gross-margin guidance held up better than feared, helping ease concerns that AI, cloud, marketing and product spending would keep margins under pressure," wrote Bloomberg Intelligence's Geetha Ranganathan. "Advertising is the clearest weak spot, with gains still lagging behind the premium business, but that matters less if subscriber momentum and pricing continue to support the core model."
In plain English: subscription growth and guidance did the heavy lifting, while ads lagged. For your portfolio, this quarter frames Spotify as a subscription-first story that is leaning into AI features and selective content deals, with ad monetization still catching up.
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